In 2012, Dmitry Godin was seemingly on top of the world. Interfirst Mortgage, the retail mortgage business he founded in 2001, had grown to $14.5 billion in originations, cementing its place as the 15th-largest originator in the country. By July 2013, things were going so well that Godin and his wife purchased a lakefront mansion in Winnetka, Illinois, for nearly $13 million, a record for the posh Chicago suburb.
But there was trouble ahead. The historically low interest rates that led to a boom in refinances in 2012 had ended, and Interfirst struggled to maintain volumes in following years as the market turned to purchase. The lender originated $10 billion in mortgages in 2013, $5 billion in 2014, $3 billion in 2015 and just $2 billion in 2016 before shutting down altogether in 2017.
Godin made plans to relaunch the business in late 2019 as a tech-forward lender that originated loans across both wholesale and retail channels.
“Market dynamics in early 2020, which have caused significant disruption to the origination and servicing markets, accelerated our plan to reenter the market with our new business model in a more robust way with a broader relaunch of the Company,” Mark Freedle, Interfirst’s executive vice president of production, told MReport in July 2020. “And today, unlike many other mortgage lenders, we reenter the residential mortgage origination market without any legacy challenges.”
In November, Interfirst issued pink slips to hundreds of non-commissioned loan officers at its call centers in Charlotte, North Carolina and Rosemont, Illinois, according to WARN notices in both states. In all, 351 employees were laid off – 77 in North Carolina and 274 in Illinois – which former workers estimate to be more than half of Interfirst’s total staff. The layoffs take effect on Jan. 21, 2022.
Former employees interviewed by HousingWire said the Chicago-based mortgage shop mainly originated safe, conventional refinance loans, and barely made any headway in the purchase market.
“They were trying to capitalize on the refinance boom,” said Cullen Gandy, a classically trained opera singer who had been hired as an LO at Interfirst and left in July. “I think 99% of the loans that I was writing there were refinances. And then when, you know, when they felt like that was going to not be viable anymore, they were just like, alright, pack up ship and then cut the fat.”
HousingWire interviewed over a dozen former employees at Interfirst, who provide a portrait of a disorganized company with unclear long-term plans, a tech stack that hasn’t lived up to its billing, and an inexperienced staff not prepared to win in a purchase market. Interfirst’s ability to grow rapidly in a low-rate, refi environment but then struggle and contract when the market turns could be seen as a cautionary tale, even in an industry as cyclical as mortgage.
Interfirst provided no explanation for the upcoming terminations. The company did not respond to multiple requests for comment left by HousingWire.
Teacher, class has started
When Interfirst relaunched operations in 2020, it had no interest in competing with scores of well-capitalized lenders for ready-made talent. In fact, the lender boasted of its ability to train people with no background in mortgage banking to be top-notch LOs through a rigorous training course paid for by Interfirst.
Teachers, nurses, first responders and food industry workers alike were encouraged to work in the company’s virtual call center. The pay would be below the industry standard – around $40,000 – but it was seemingly stable work that was beyond the front lines of the pandemic, former employees said.
One experienced mortgage veteran who interviewed with Interfirst for a sales manager position said the company described its strategy as hiring neophyte LOs and putting them in a consumer direct setting, with no outside or self-sourced business, “where websites like Lending Tree & Rate.com drive you clients with rates .25% -.375% below the market.” Clients upload all documents into their loan origination system directly to reduce/eliminate operational staff.
According to former employees and executives, business seemed strong as recently as summer 2021. The firm told HousingWire that it had originated $1.65 billion in mortgages between June 2020 and June 2021 and was actively recruiting new loan officers and support staff.
A $175 million investment from private holding company StoicLane in October would be used to grow operations and refine and develop new technologies. (StoicLane did not respond to a request for comment.)
Still, former employees interviewed by HousingWire questioned what the company’s long-term ambitions were.
“It felt like there was a desire to grow and that senior management was always chasing something new and shiny, whether that was a new name, a new brand or a new dialer,” said Justin Woodward, a former loan officer at Interfirst.
Woodward added that there was a notable push to hire new LOs and “to become more of a full-service lender and to get government-qualified to offer FHA, VA, and USDA loans.”
Ultimately, the refi model can only turn a profit in a crazy market where processing times and capacity issues drive clients to find the lowest rate and fees, the veteran sales manager said.
“But in a normal mortgage market where purchases outweigh refinances and people need more hand-holding and customization, this model falls flat.”
Building the plane while flying it
Interfirst executives also talked a big game about its new proprietary loan origination technology platform, former employees said. They evangelized that the tech stack would apply artificial intelligence to origination, eliminating upfront fees and cutting interest rates.
Gandy, who was based in Illinois, remarked that while he was there from Oct. 2020 to July 2021, Interfirst’s tech was “constantly in a flux” and was tested on the call center as it was being developed.
“They didn’t do anything to where it was like a beta, and then they would come out with a product, they would simply develop the product, in tandem with us doing our job,” he said. “A lot of my work involved me creating and learning workarounds. I mean, it wasn’t always terrible, but it was annoying.”
Another former loan officer who requested anonymity noted that artificial intelligence, though publicly advertised by the company, was never actually implemented. Most of the LOs who spoke to HousingWire said that the dialer system at Interfirst was faulty and constantly broke.
Two former executives in Interfirst’s wholesale division, who requested anonymity because they still work in the mortgage industry, also complained of lagging tech infrastructure and disorganization among managers.
Fahad Janvekar, another former loan officer at Interfirst, said that he assumed that the technology lags and disorganization at the company all played into the culture of a fintech startup.
“So, my thought was, okay, there’s going to be a massive scale up, but I also saw a little bit of an infrastructure lag,” he said.
Janvekar also remarked that he didn’t think the company would succeed in the purchase space, noting, “there’s an experiential knowledge gap, because you’re promoting people that may not necessarily be the right fit for those roles, and you’re already promoting them because you don’t have anybody else.”
Retail shops that lean heavily on rate-term refinances have been the first lenders to shed large segments of their originations staff.
Those workers are more likely to be new to the industry and don’t have the book of contacts or the experience to hunt for purchase business themselves.
In the last month, Better.com on a Zoom call clumsily laid off 900 staffers so it can compete with rivals for purchase business, a decision that led to the ousting of CEO and founder Vishal Garg. And last week, Freedom Mortgage’s subsidiary Roundpoint Mortgage laid off hundreds of sales professionals from its call center in South Carolina.
Refinance numbers forecasted by the Mortgage Bankers Association show that the share of refi activity in the market has dropped from 64% in 2020 to 59% in 2021. In November, rate-term refinances fell 66% from the prior year.
Overall, refis are projected to plummet 33% in 2022, not dissimilar to the market conditions that presaged Interfirst shutting down in 2017.
Industry observers who spoke to HousingWire believe that Interfirst, having shed much of its retail operation, will turn to mortgage brokers and hope that they feed them deals.
“The retail model was set up to be upsized and downsized as the refinance market heats up and cools off,” said one mortgage pro who is familiar with Interfirst’s operations.
Whether Interfirst will actually make a notable dent in the wholesale market is up for debate. Former executives in the company’s wholesale division told HousingWire that it won’t come as a surprise if the lender moves to shutter wholesale all together.
Said one former wholesale executive, “There was a point before I left Interfirst where I thought to myself, ‘Oh my god, the service is so bad, wholesale will shutdown.’”
James Kleimann contributed reporting to this story